Microsoft Sees Gaming Revenue Increase

Digital Spy reports:

Microsoft has announced a profit increase in its gaming division despite a drop in company-wide revenue.

Both Xbox 360 and PC gaming sectors have seen a profit increase of 16% to $1.57 billion the last quarter


It has been pointed out that it is a revenue increase, not a profit increase. This has been confirmed by MS own statement.
This doesn't rule out a profit increase, though.

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Dlacy13g3494d ago

Entertainment division revenue doesn't equal just 360 revenue. So to all the nay sayers from yesterday...looks like gaming with MS isn't going anywhere.

soxfan20053494d ago

Exactly - the Entertainment division consists of DOZENS of products besides Xbox 360, and there is no breakdown of each of these products' contribution to profit or loss. Yet, some people here have jumped to the conclusion that it must be Xbox 360 that is losing money.

sack_boi3494d ago (Edited 3494d ago )

It's shipped! Only shipped!

green3494d ago

There are 5 different business in Microsoft entertainment and devices division

- Interactive and entertainment division which consists of the 360 and games for windows.

- mobile communications business which consists of windows mobile

- TV music and video business which consists of Zune,windows media room and windows media center.

- specialized devices and applications business which consist of the Hardware Group, Microsoft Surface, Office for Mac, Microsoft Auto and Windows Embedded software.

They hear profits are down and they think it's the 360 when the zune is doing badly and stuff like Microsoft auto which is actually great but has failed to catch on with the automotive world.I think it's only Fiat that uses it but i am not sure.Anyway it's good to see the 36o s doing well.

JokesOnYou3494d ago (Edited 3494d ago )

pssst...don't tell darkride66 and the sony loyalists who jumped all over yesterdays news, they might do something crazy. lol

Lets hope all the platforms post a healthy profit.


Anon19743494d ago

360 profit IS NOT up 16%. 360 revenue is up 16%. There's a huge difference between profit and incoming revenue.

Check this out, from Microsoft's segment update.

"Cost of revenue increased $52 million or 6%, primarily driven by increased costs associated with the Xbox 360 platform, reflecting the increase in console and video game sales."

So the increase in 360 sales actually contributed to a $52 million drop in revenue for the quarter? But increase in sales causing a revenue drop? Why, that sounds like the 360 is being sold at a loss, doesn't it?


commodore643494d ago (Edited 3494d ago )

Slight flaw in your reasoning, darkie, as you know...

"Cost of revenue" = "Cost of goods sold"
"Subtracting the cost of goods sold from the amount billed when selling the goods (sales revenue) produces the gross profit on the goods.

The net income, what most people understand as the business' income or profit, is determined by subtracting the cost of goods sold and the indirect expenses from the sales revenue."

Any and all goods sold incur COGS (accounting 101).
The COGS refers to the production cost of the unit.
As less units are sold, COGS goes down.
as more units are sold, COGS goes up.

the unit sales of the 360 are up, hence COGS are up.
that is why the report states " ....reflecting the increase in console and video game sales."

If you look into a comparable ps3 quarter, you will note that as ps3 sales go up, the ps3 COGS also goes up, and vice versa.

It is unfortunately unclear from this article whether the 360 hardware is actually sold at a loss or a profit.

The COGS figure merely shows that, as more product was sold, the expense of producing the product sold rose in step with the units sold.

gaffyh3494d ago

@darkride66 - Lol, you just owned everyone. But yeah it seems like MS is selling 360s at a loss, which is kinda what I expected when they did their price cut.

IdleLeeSiuLung3494d ago (Edited 3494d ago )

"So the increase in 360 sales actually contributed to a $52 million drop in revenue for the quarter? But increase in sales causing a revenue drop? Why, that sounds like the 360 is being sold at a loss, doesn't it?"

You are correct, revenue is not equal to profit. The story is incorrect. However, revenue is NOT DOWN as you stated and there is no indication that each console sold is at loss. That is just your spin!

It MIGHT just means each console is sold at a lesser profit, break even OR at a loss.

edit: I actually stand corrected, darkride is talking about the whole division.

sack_boi3494d ago (Edited 3494d ago )

Here they come oh ho

Arent you the same person that posted an article saying Microsoft's sales decreased 130%? Come on Dark, come on.

JokesOnYou3494d ago (Edited 3494d ago )

Its real simple.

No, revenue is the total of amount generated through sales to either the retailers or consumers.

Total revenue minus your total expenses= Profit.

We need more info to determine losses on each unit sold.


The Lazy One3494d ago

"EDD operating income decreased primarily due to increased research and development expenses and cost of revenue. Research and development expenses increased $66 million or 18%, primarily reflecting increased headcount-related expenses associated with the Windows Mobile device platform."

from the financial report. RnD increased 66 million bucks. By nature, RnD provides 0 revenue at that time, but is an investment for later.

If RnD costs went up 66 million, and the division has a 33 million loss, that would mean that aside from increased RnD spending, the company was profitable. Therefore, the 360 is profitable.

Math. Use it.

Lucreto3494d ago (Edited 3494d ago )

The article states "Both Xbox 360 and PC gaming sectors have seen a profit increase of 16% to $1.57 billion the last quarter"

But that 1.57 billion is for the whole Entertainment and Devices Division not just the xbox and PC gaming division.

iHEARTboobs- I totally agree. I am an accountant and I am sick of it. I am putting my calculator away.

iHEARTboobs3494d ago (Edited 3494d ago )

Check out the update on the description.

Edit? Is it just me or is this getting out of hand?

@ Why Dis: Yes. I thought JOY said something about the 16% increase being profit so I tried to point out the description change which now states it's increased revenue. But either he changed his post or I read someone else say it and I thought it was him. What's your point?

You know what just gave me a chuckle? I always hear people stating, "give me the facts" and "show me the numbers." Well, now the numbers are there and everyone's fighting over what the hell they mean. haha

Anon19743494d ago (Edited 3494d ago )

Yeah, they don't give specific numbers on the 360 platform alone - I was just referring to the MS Entertainment division as a whole earlier.

And Commodore64 is correct. We went over this earlier regarding Cost of Goods sold. Increasing sales will increase COGS..however the goal of course is for profit made per unit to make up for COGS. We really don't know by what degree COGS is offset by money brought in per console because Microsoft hasn't been forthcoming with that information. As I mentioned below, though, MS did comment that the increase of 400,000 consoles per quarter did eat up 52 million in revenue compared to last year. It strikes me as odd that if this was offset by profit made per unit that MS would not address this.

@ The Lazy One. Math, eh? Ok. I'll give it a go.
66 million spent extra on R&D. 31 million loss. But wait, last year during this same quarter - revenue was almost exactly the same and they had a profit of 106 million. So that means 106 million has vanished along with the 31 million. That's 137 million.

You're right. I just used math to disprove your theory. That was useful.

@ sack_boi. You're 100% correct. I did post an article saying MS Entertainment profit was down 130% year over year. It was because MS Entertainment profit is down 130% year over year. Thanks for playing.

Why dis3494d ago (Edited 3494d ago )

Leave You're getting owned.

Stop acting like a caged animal.

@1.13 speaking of the update do you even know what *preclude* means?

Nineball21123494d ago

You posted: "As less units are sold, COGS goes down.
as more units are sold, COGS goes up.

the unit sales of the 360 are up, hence COGS are up.
that is why the report states " ....reflecting the increase in console and video game sales."

If you look into a comparable ps3 quarter, you will note that as ps3 sales go up, the ps3 COGS also goes up, and vice versa."

Yes, this is true. What we need to know is COGS as a % of Sales for each period to determine if COGS went up in a "normal" direct relation to the increased sales, or whether it went up higher than the normal % to sales.

If COGS is higher as a % to sales than prior periods, that could be two things:
1. the ACTUAL cost of goods sold increased, ie. higher raw material costs, higher labor costs, higher freight, etc.
2. Costs of goods sold remained the same on a per unit basis, but the SALES PRICE is lower. Ding, Ding, Ding!!!

That would, obviously, also show a higher COGS as a % to sales.

kewlkat0073494d ago (Edited 3494d ago )

anyhow, I'll let you guys work with the numbers.

All I know is MS gaming is going nowhere..I'm sure the Xbox franchise is still in the RED but making strides with each gen.

Looking at he BIG picture MS is doing OK despite being the underdog in the Industry.

JokesOnYou3494d ago (Edited 3494d ago )

yeah I saw the update, which is why I said we need more specific info to determine any losses due to 360, actualy though #1.1 has an even better explanation, but whatever anybody can clearly see 360 is doing well...none of us make a dime either way, I think this little debate only started because of darkride66's blantant attempt at bashing with the headline he changed from the original news source. Like I said hopefully all the companies will make a profit and in the end we still won't make a dime.

Of course we like seeing facts and numbers but NOT SPIN on the numbers, so that part of your post is BS because again, darkrider66 himself yesterday implied it was due to 360 because of price cuts and that determination can NOT be made without more specific info.


The Lazy One3494d ago (Edited 3494d ago )

no crap revenue went down because the 360 dropped in price. It says it in their report. You've said in this thread as well as others that the 360 is being sold at a loss, which you don't have evidence to back up. You just have evidence that they are making less money off it than they used to. That is not the same as a loss.

If it were being sold at a loss, they should have a bigger loss than a loss explained entirely and two times over by an increase in research and development spending.

Conclusion: get a better math teacher or take a business course.

@below "and, again, I've never once said the 360 was being sold at a loss"

Your first post on this page: "So the increase in 360 sales actually contributed to a $52 million drop in revenue for the quarter? But increase in sales causing a revenue drop? Why, that sounds like the 360 is being sold at a loss, doesn't it?"

Anon19743494d ago (Edited 3494d ago )

I said MS Entertainment profit was down 130% year over year. It is, that's easily verified. I never once said the 360 was the culprit. There isn't enough information to make that claim. What we do know is that since the price cut MS Entertainment's profit has dropped 75% for the last 6 months compared to the same 6 month period the year before (or $361 million) despite revenue staying the same. MS admitted that shipping 400,000 more 360 consoles cost them $52 million in revenue this last quarter. They also point out that they're spending more on R&D than last year.

@ TheLazyOne. Have you not been paying attention? Revenue was only down 2% this quarter, and it was up the quarter before and, again, I've never once said the 360 was being sold at a loss.

It could be the entire $361 million drop is R&D, I don't know. But if it were then the next question would be - What is Mircrosoft suddenly doing with MS Entertainment that could cost almost half a billion in R&D over 6 months?

iHEARTboobs3494d ago (Edited 3494d ago )

It's friday, lets chill out. When I get home i'm going to probably play some Halo3 online and try to adjust to this new (to me) playing style, then pop in Uncharted or Fat Princess (the beta). As you can see guys, i'm good. haha

@Joy: Did you change your post up there? I thought you had said the %16 increase was in profit. Therefore i pointed to the description change that stated the %16 increase was in revenue. No harm, no foul. And my point about the numbers isn't BS because it's true. What darkride said yesterday was true (i'm referring to what he said in the post above me, 1.20). I can tell he's taken some accounting but based on the numbers you can't pin any losses on the 360 and be certain without having more data. I don't think he's saying that, just that's it's a good possibility why they're down in that department. So that's still possible and open to speculation, that's all.

locos853494d ago

It looks like we all remember what we learned in Economics class. :)

gamerdude113494d ago (Edited 3494d ago )

Maybe I am completely misunderstanding this article, but there seems to be some issues with it.

The article suggests that the 360/PC gaming segments of EDD increased 16% in profit to 1.57 billion this quarter, but Microsoft's financial's indicate a 25 million dollar drop to 1.5 billion for the entire EDD? How could gaming revenue be higher than the entire segment's revenue. Also, nobody seems to be discussing the 140 million dollar drop (operating income) in EDD from the same quarter last year. Why are we excited about the increased console sales when the division lost 31 million in the quarter?

poopface13494d ago

It says that microsofts PROFITS were down. Thats not that big a deal, and is expected in theses times. THe important part is this part:

"However, Microsoft as a whole saw profits drop by 6% to $13.65 billion, a first in the company's 23-year history."

Microsofts profits were down for the first time but their profits were still 13.65 billion. That doesnt seem like a company that is in trouble. But the desperate people will try and spin it any way they can.

I did not murder him3494d ago (Edited 3494d ago )

Go pop in those games later on that still doesn't change the fact your point was moot, not to mention people are suspicious of your comments because of your post history.

MicroSony4Life3494d ago

I have never seen some one hate a company so much...But but I own a 360...I would like to know what Microsoft ever did to you darkride666 to make you hate them so much.

I can picture darkride on google trying to find every negative thing om Microsoft. Dude enjoy both consoles.

Head Shot King3494d ago

Is a person with out a life simple. He makes it his mission to log onto N4G and bash every 360 positive news. I just looked at his comment history and 75% of his post are on 360 related news and he always tries to justify his self with I own a 360.

Even when he says some thing positive about a 360 game he always makes sure he counters it with a positive Sony comment.

I guess the best thing you can do is do not feed the troll.

+ Show (25) more repliesLast reply 3494d ago
commodore643494d ago (Edited 3494d ago )

MS has managed to INCREASE its profits in both the 360 and PC segments by 16% each, despite losses in the EADD.

Not only that, but MS has also recently shipped record numbers of xbox360s to bring the total to 30.2 million.

The world has never looked better for gamers!

Kudos, MS!

creeping judas3494d ago

Agreed C64!!!

But I think when we look at the big picture, both the PS3 and Wii are also selling. So I think as gamers we should all be happy that thru this recessions console makers are still viable.

Good work to every new console owner out there!!!!!

IdleLeeSiuLung3494d ago

I don't know why anyone would disagree with you when there is good news unless you are a fanboi. Disagreers, you know who you are!

Good news for the gaming industry means it is healthy and we will continue to see further investments that benefits everyone regardless if it is Sony, Nintendo or MS.

ShabzS3494d ago

he said 'kudos ms'... thats not polite language here on n4g

shadow27973494d ago

...Or because MS didn't necessarily increase their profits (check the update to the summary).

I would have been highly impressed if MS had managed to actually increase profits 16% in this recession. Still, an increase in revenue is still notable.

Pennywise3494d ago

I try to stay out of sales conversations... but I am here to possibly explain why they are disagreeing.

It could be two things:

1) Nothing is proven about Profits. Ive read all of the user comments from our community stock analysts and there seems to be a lot of confusion.

2) Kudos to MS for what? This is where my disagree came from. I can not give kudos to MS for anything to do with the 360 except LIVE. They have really sparked a battle of competition with online aspects. I like that. But I can not give them kudos for their faulty hardware. I dont even care about that. As a consumer, I can just choose not to buy it and it doesnt affect me what so ever... BUT - what does affect me is their choice to use DVD and not include HDD in every machine. The lack of a next gen medium(bluray) has really hampered technical innovation in multiplatform games.

I know I am going to get mass disagrees, but hey I am not at a beauty pageant. I do not need to be politically correct.

ShabzS3494d ago (Edited 3494d ago )

right?... so why is that not considred profit? .. even with the zzz-une on the market... which is really not helping the ent. division over at ms

Pennywise3494d ago (Edited 3494d ago )

Shbzshar, I am not saying that it DOESNT. But if your revenue increases because you are selling more consoles, then technically - yes. It should mean more profit. But if you are selling more consoles because you cut the price drastically on your console... you are selling more but PROFITING less on the hardware.

But with the prices they are charging for LIVE - They are definitely making a profit. $1Billion a year is INSANE to run a network.

I guess I can give MS Kudos on something - Making people believe paying all that money for LIVE is worth it. Amazing. Just like Blizzard with $15 per month. Those guys are laughing hard all the way to the bank.

@Fredy - You are right, but we dont know for sure. MS have been after market share more than anything.

fredy3494d ago

"But if you are selling more consoles because you cut the price drastically on your console... you are selling more but PROFITING less on the hardware."

not if the price to produce the good have gone down...streamlining the process and bringing the price to producing the hardware down allows u to cut prices..

sony was able to cut it's price after watering down the ps3 and guttign the ps2 out of it

ShabzS3494d ago (Edited 3494d ago )

unlike sony microsoft only have 360 and live giving them money to make games.. or (buy exclusive content... no i did not just read your mind)...

sony is like cemented.. ps brand isn't going anywhere.. with psp ps3 ps2 ps1 and the 20 something first party studios...

live is an integral part of xbox brand... they would be left in the dust if they only had money in from console sales...

having said that i hate paying for live... but if i need ms up and running to give me more games... or exclusive content (no its nothing spooky) i have to pay and conribute

below @ IT (seriously is no one getting this?)

psn is pretty much up there with live in terms of matchmaking and online stability... and avereage joe shopping at walmart doesnt usually know that you have to pay for live and psn is free... he usually picks up the cheaper consle with the same feature... which is what we are seeing here...

Pennywise3494d ago (Edited 3494d ago )

Oh yeah, I understand that and it is a pretty good business plan because the profits from live are insane. Payments far exceed the costs for MS.

What are they going to do once PSN is 100% up to par with voice chat and invites?? Ones free and one is $50 a year. I am curious to see how it plays out.

Its nice to have a discussion without people flaming or personally attacking. I am not trying to troll, but I know some will see it like I am.

@IdleLeeSiuLung - below --- Yeah, it is all an investment for future business. I know they could of lowered their Mfg. costs, but I think they cut there price not caring about a loss. They want market share. So I find it hard to believe that the 360 hardware makes them any profit at all. With price drops and warranty replacements... NO WAY is Ms making money on the console. Majority of their "profits" come from LIVE. Which raises my question of what happens when PSN is feature for feature the same as live. Will Xbox users rebel against the payment system? I know I would.

IdleLeeSiuLung3494d ago

My posting was posted before somebody made pointed out the mistake. It could swing either way, why people disagree.

Either way, your reasoning about holding back technology could be applied to the Wii or the PS3 as well. It is just a technological hurdle just like anything else. Blaming it on a company is just as silly as blaming it on the consumer that choose to buy the product and support MS "forcing" the developer to go multi-platform.

Pennywise said:
"It should mean more profit. But if you are selling more consoles because you cut the price drastically on your console... you are selling more but PROFITING less on the hardware."

Profiting less, but at the same time increasing your future profit from increased software/accessory sales is called an investment. Even with the increased console sold over last year, their software and accessory attach rate is still going up significantly. That is very healthy. source:

This model of selling console at a loss and profit from software sales isn't new.

R2D23494d ago

Him and morgan are always on a 360 article posting negative stuff.

Why can he just like both consoles.

+ Show (9) more repliesLast reply 3494d ago
ceedubya93494d ago

Despite the criticism they get for buying DLC and 3rd party support and all of that, they have to be doing something right.

I'm pretty sure that the Zune isn't helping matters much for the whole division. Its a shame too, because its a nice piece of tech. The ipod brand is just too strong.

mastiffchild3494d ago (Edited 3494d ago )

A lot of the bad feeling I have is that these figures show nothing of what they "saved" short term by closing studios and putting creatives out of work while nuying said DLC and timed demo exclusivity.

Hell, I've got all three consolesand love some of my 360 games but I did feel for those put on the dole queue while MS cut prices of consoles and still had money for third parties that could have been speculated longer term on their own IPs-maybe I'm just being romantic but these figures don't show any of the detail I'd like to see whether those closures were really needed or just done to even up the costs of the mentioned DLC, Demo exclusivity(of a week!)and ease the pressure put on the 360/gaming division from, within MS.

Obviously It'd be great to know if these figures meant anything good but, for me, the detail isn't there. Much like it wasn't on the loss story yesterday which some people jumped on. The sad truth is that you can rarely trust figures as the can hide anything/be made to look better or worse or spun endlessly in both fekkin directions.

Which is why I'll neither hangout the bunting in congrats nor hit MS with a big "nasty company" stick(which I use when I have proof of big conglomerates playing dirty-prolly the fear of said stick that's making all three console makers spin figures like they do!)when it looks good(today) or bad(yesterday). Experience would tell us that the actual truth will be far more dull and be somewhere around the middle of the two quoted sets.

I'd love the three of them to be well in the black, mind, for all our gaming sakes.

3494d ago Replies(2)
Dave20013494d ago

Ok now that i have said that i think I'll go and play some games and not profits and sales like some people.:P *runs away from my fellow X-box fan-boy's*